Labor Dispatch

What Is Labor Dispatch?

Labor dispatch is an employment arrangement in which a licensed staffing agency signs the employment contract with a worker and assigns that worker to perform duties at another organization, known in China as the receiving or using unit. The worker performs day-to-day work at the receiving organization, while the agency remains the legal employer under the dispatch arrangement.

In mainland China, labor dispatch is a regulated supplementary form of employment, not a way to put any permanent role on an agency’s payroll. The actual employment structure, position and supervision matter more than the English name a provider gives the service.

Who Is the Employer in a Labor Dispatch Arrangement?

There are three parties: the dispatch agency, the receiving unit and the dispatched employee. They do not have interchangeable responsibilities. The agency signs the labor contract and handles employment obligations assigned to it by law. The receiving unit directs the work and has statutory responsibilities for working conditions, appropriate workplace protections and dispatched-worker rights.

China’s Labor Contract Law, Articles 57–67, requires a dispatch agency to enter a fixed-term labor contract of at least two years with dispatched workers and pay wages monthly. It also sets rules on payment during intervals without an assignment. The dispatch agency and receiving unit must conclude a labor-dispatch agreement specifying the positions, worker numbers, assignment term, remuneration, social insurance payments and related obligations.

The receiving unit cannot assume that paying a service invoice transfers every legal responsibility to the agency. Depending on the breach, both entities may face obligations or liability.

Which Jobs Can Use Labor Dispatch in China?

Under the Labor Contract Law and China’s Ministry of Human Resources and Social Security guidance, dispatch is confined to three categories of work:

• Temporary: A position that exists for no longer than six months.
• Auxiliary: A non-core position providing services to the organization’s principal business activities.
• Substitute: A role temporarily covering an employee who is absent for reasons such as leave or study.

Calling a role ‘temporary’ in a contract is not enough if the actual position is a continuing core job. For auxiliary positions, the Interim Provisions on Labor Dispatch also require a process involving staff consultation and publicizing the chosen auxiliary positions within the organization. Specific institutional exceptions and local treatment should be checked before applying a standard dispatch model.

What Is China’s 10% Labor Dispatch Limit?

The Interim Provisions on Labor Dispatch, Articles 3–4, generally limit the number of dispatched workers at a receiving unit to 10% of its total workforce. The denominator includes the unit’s directly contracted employees plus its dispatched workers—not just the direct employees.

For illustration, an eligible receiving company with 90 direct employees and 10 dispatched employees has 100 workers in total and a dispatch share of 10%. If it takes on another dispatched employee without changing its direct headcount, the ratio becomes 11 out of 101, or about 10.9%. This is a headcount illustration, not permission to use any job category for dispatch.

The statutory rules include particular provisions for some organizations and arrangements, including foreign representative offices. Employers should determine the legally relevant receiving unit and any applicable exception before calculating the limit. A foreign company with no China entity should not automatically be treated as if it were an ordinary domestic receiving unit.

What Rights Do Dispatched Workers Have?

Dispatched workers are employees, not independent contractors simply because a third party signs their contracts. Under Article 63 of the Labor Contract Law, they are entitled to equal pay for equal work compared with workers performing comparable duties at the receiving unit.

The agency and receiving unit must also meet their respective obligations concerning wages, statutory social insurance, working conditions, safety, leave and legitimate employment records. When there is a gap between assignments, the law contains a minimum-wage payment obligation for the dispatch agency, subject to the applicable statutory wording and locality.

Returning a dispatched worker to the agency does not, by itself, terminate the worker’s labor contract. Lawful return and termination grounds have separate requirements. Employers should not treat dispatch as a way to avoid the ordinary protections that apply to employees.

Does a Labor Dispatch Agency Need a License?

Yes. Article 57 of China’s amended Labor Contract Law requires an enterprise carrying on the labor-dispatch business to obtain the relevant administrative license. Among the statutory prerequisites are registered capital of at least RMB 2 million, suitable premises and facilities, and legally compliant dispatch-management rules.

The RMB 2 million requirement concerns the dispatch business operator; it is not a salary threshold, service fee or universal capital requirement for every employer using an agency. Older English translations of the original Labor Contract Law sometimes state RMB 500,000 because they predate the 2012 amendments. Those versions should not be used for the current licensing threshold.

A receiving organization should confirm the actual contracting agency’s identity, permit status, role coverage, social-insurance arrangements and responsibility allocation rather than relying solely on a sales description.

Labor Dispatch vs EOR, Outsourcing and Direct Employment

Direct employment means the company itself is the employing party. In genuine service outsourcing, a vendor undertakes to deliver a service or result and ordinarily manages its own people. In labor dispatch, the receiving unit uses workers supplied by a licensed agency and manages their work within a specific statutory framework.

An Employer of Record (EOR) is a commercial service description, not a single statutory employment category in China. Some arrangements may resemble regulated dispatch; others, including arrangements for overseas clients without a local entity, require a separate legal analysis. The label does not establish an exemption from labor-dispatch rules or prove that those rules automatically apply.

Whether an arrangement falls under labor dispatch rules depends on who employs and manages the workers, not the provider’s label. Similar classification risks arise in China EOR arrangements, where the actual employment structure matters.